LUCKLAND CO.,LTD. FY2026 Q2 Earnings Report

Quick View

Executive Summary

In 2026 Fiscal Year Q2, the Company reported lower revenue and lower earnings, with deterioration observed in both profitability and cash generation. Revenue was ¥22.66B (-12.5% year on year), Operating Income was ¥0.82B (-49.7%), Ordinary Income was ¥0.88B (-44.5%), and Net Income attributable to owners of the parent was ¥0.665B (-30.7%). The decline in revenue was attributable to a reduction in project volume, while the decline in earnings reflected deteriorating operating leverage due to a lower gross margin and a relative increase in the SG&A ratio.

Factors Affecting Performance

【Revenue】Revenue was ¥22.66B, representing a 12.5% year-on-year decline. The Company operates as a single-segment business focused exclusively on store facility production, and does not disclose a breakdown by business category. However, contract liabilities declined to ¥1.88B from ¥2.08B in the previous year, suggesting weak accumulation of advance-payment projects and an impact from a gap between projects.

【Profit and Loss】The gross margin declined to 15.1% from 16.8% in the previous year due to an increase in the cost-of-sales ratio, while total gross profit contracted to ¥3.42B from ¥4.36B. Although SG&A expenses were contained at ¥2.60B (-4.3%), the SG&A ratio increased to 11.5% from 10.5% as a result of the decline in revenue, and the operating margin fell to 3.6% from 6.3%. Non-operating income and expenses resulted in a net gain of ¥0.06B, while extraordinary income and expenses resulted in a net gain of ¥0.03B. These non-operating factors supported Ordinary Income and income before taxes, but Net Income remained at ¥0.665B (-30.7%). In conclusion, the Company reported lower revenue and lower earnings.

Segment Analysis

The Company and its consolidated subsidiaries operate a single segment, the Store Facility Production Business, and disclosure of segment-level performance has been omitted.

Key Financial Metrics

【Profitability】The operating margin was 3.6%, down 2.7pt from 6.3% in the same period of the previous year, while the gross margin also declined to 15.1% from 16.8%. The net profit margin decreased to 2.9% from 3.7%, suggesting that the pass-through of cost pressures into prices has not progressed sufficiently.【Cash Quality】Operating Cash Flow (OCF) was limited to ¥0.16B, and the OCF-to-Net Income ratio was low at approximately 0.25x against Net Income of ¥0.665B. While trade receivables decreased by ¥4.17B, trade payables also declined by ¥3.15B, with changes in working capital offsetting each other and constraining cash generation.【Investment Efficiency】ROE was 5.1% and is composed of the product of total asset turnover and financial leverage; however, the decline in Net Income during the period was the primary factor lowering the ROE level. Investment remained restrained, with capital expenditures of ¥0.09B versus depreciation and amortization of ¥0.20B.【Financial Soundness】The Equity Ratio improved to 53.6% from approximately 44.0% in the previous year, while cash and deposits remained at a substantial level of ¥11.22B. Total assets contracted to ¥25.82B from ¥29.74B, but net assets increased to ¥13.84B from ¥13.11B, indicating a stable financial foundation.

Cash Flow Analysis

Operating Cash Flow was ¥0.16B, a significant decrease from ¥0.80B in the same period of the previous year. In terms of working capital, the ¥4.17B decrease in trade receivables made a positive contribution, while the ¥3.15B decrease in trade payables had a negative impact and corporate income tax payments had a negative impact of ¥0.93B, placing pressure on cash generation from operating activities. Investing Cash Flow was -¥0.18B, primarily reflecting capital expenditures of ¥0.09B, while Financing Cash Flow was -¥0.38B due to debt repayments and dividend payments. As a result, Free Cash Flow was slightly negative at -¥0.02B, highlighting the divergence between net income and cash generation.

Earnings Quality

Against Ordinary Income of ¥0.88B for the period, Net Income was ¥0.70B after the deduction of ¥0.21B in corporate income taxes and other taxes. Non-operating income consisted mainly of minor items such as dividend income and was primarily recurring in nature. Extraordinary income of ¥0.10B and extraordinary losses of ¥0.07B were both small in scale and limited to temporary factors such as gains on the sale of investment securities and gains or losses on the sale of fixed assets; therefore, their impact on total earnings was limited. Meanwhile, OCF was ¥0.163B, substantially below Net Income of ¥0.665B, with working capital factors—changes in trade receivables and trade payables—creating a divergence between earnings and cash through accruals. Comprehensive Income was ¥0.70B, approximately in line with Net Income, while adjustments from foreign currency translation adjustments and valuation differences on securities were minor and did not materially distort earnings quality.

Earnings Forecast and Guidance

The Full-Year earnings forecast remains unchanged at Revenue of ¥58.00B (+2.5% year on year), Operating Income of ¥4.18B (+3.5%), and Ordinary Income of ¥4.26B (+2.7%), with no revisions as of the current quarter. Progress against the full-year forecast was 39.1% for Revenue, 19.7% for Operating Income, 20.6% for Ordinary Income, and 25.8% for Net Income, all below the 50% benchmark for the first half. Accordingly, achievement of the back-half-weighted plan depends on project progress and a recovery in profitability during the second half.

Shareholder Returns

The interim dividend was ¥20 per share, unchanged from the previous year, while the full-year dividend forecast remains unchanged at ¥40, with no revision. The Payout Ratio based on first-half Net Income is approximately 34.7%; however, using the full-year Net Income forecast of ¥2.58B as the denominator, the Payout Ratio is equivalent to approximately 17%. First-half Free Cash Flow was negative, and dividend funding therefore depends more on cash on hand (¥11.22B) than on cash flow.

Risk Factors

1. Project profitability deterioration risk: The gross margin declined to 15.1% from 16.8% in the previous year, and a provision for loss on orders of ¥0.33B was recorded, suggesting the existence of low-profitability projects.

2. Vulnerability in cash conversion: OCF was only approximately 0.25x Net Income, with the decrease in trade receivables (+¥4.17B) and the decrease in trade payables (-¥3.15B) offsetting each other and resulting in working capital remaining tied up.

3. Back-half-weighted full-year plan risk: First-half progress was significantly below the standard 50%, at 39.1% for Revenue and 19.7% for Operating Income, making recovery during the second half a prerequisite for achieving the plan.

Industry Benchmark (Reference; Company Research)

Industry Benchmark (it_telecom)

Profitability and Returns

Profitability is substantially below the industry median.

Growth and Capital Efficiency

While many companies in the industry are reporting revenue growth, the Company reported a revenue decline and is lagging in terms of growth.

※Source: Company research

Key Points from the Earnings Results

1. Structural decline in margins: The operating margin declined to 3.6% from 6.3% in the previous year, and the gross margin declined to 15.1% from 16.8%, confirming a structure in which the pass-through of cost increases into prices is lagging.

2. Decline in cash-generation capacity: OCF was only approximately 0.25x Net Income, and the first-half earnings data indicate that changes in working capital are placing pressure on cash flow.

3. Back-half-weighted full-year plan: First-half progress for both Revenue and earnings was below 50%, making project progress during the second half a critical factor in achieving the full-year plan.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,546–¥1,641 at ±1% for the cost of equity, and ¥1,582–¥1,609 at ±0.1 for ω.

Notes:

• Amortization of goodwill of ¥4.3 per share has been added back to earnings (due to its non-cash nature and to facilitate comparability with IFRS companies).
• Net assets as of the quarter-end have been used (there is a timing difference relative to the full-year forecast).

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / This is a mechanically calculated value based solely on publicly disclosed data; it is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee the future share price.)

---

This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility and, where necessary, after consulting a professional.

---End of Report---